[Column] Bob Koigi: Trade talks should be holistic and accommodate interests of all
Kenya's horticulture industry which has emerged as one of the key foreign exchange earners for the country, and second to tea, has in the recent past been under threat due to incessant stalled export agreement with the European Union.
The sector has been hard hit in the past four years as producers grow anxious over a weakened global economy, and failure to conclude these talks. The delayed conclusion of the Economic Partnership Agreement stalled following disagreements touching on economic and development co-operation, rules of origin, export taxes and the most-favoured nation clause.
What is worrying is that the talks have been going on for more than a decade, and with each deadline passion without amicable solution, we all have cause for concern. Growers have increasingly become jittery arguing that inconclusive trade talks have affected planning with most of them cutting back on investments.
In 2013, Kenya’s flower industry brought in 46 billion Kenyan shillings, three billion shillings more than the previous year. The European Union is the largest market for the flower industry having absorbed about 70 percent of all exports in 2013.
Kenya’s Sh110 billion fresh produce export trade with the EU has always teetered on the brink of precipice because with each stalemate, the country gets closer to losing the preferential tax-free access it currently enjoys.
This owing to the fact that Kenya, unlike its EAC partners, is not classified as a Least Developed Country in World Trade Organisation nomenclature.
If no pact is signed, earnings from Kenya’s hugely successful horticultural industry could be greatly diminished, as key buyers, like the Dutch flower auctions, seek cheaper options.
Flower exports are consequently a crucial economic activity for the country, and Kenya could stand to lose roughly 500,000 jobs directly and indirectly if the agreement is not concluded. Around 2.2 million jobs could also be at stake.
Should Kenya not sign the Economic Partnership Agreements, its trade with Europe would revert to the less-generous terms of the General System of Preferences where some of its products, which have been enjoying zero duty, would attract attracting charges of between 8.5 to 15.7 per cent. These products include cut flowers, fresh fruit and vegetables among others.
While there are legitimate concerns which can explain why the talks have stalled it is imperative that the agreements be mutually beneficial and not based on threats or coercion.
Once pen is put to paper it will be hard to reverse the agreements. That is why every detail should be analyzed and reviewed with a fine toothcomb. We cannot make the same mistakes we made in the 90’s that condemned our farmers to a chaotic market model.
Past liberalization of agricultural markets under the Structural Adjustment Programmes and liberalization enforced by the World Trade Organization (WTO). This liberalization that contributed towards the loss of our cotton and sugar industries in Kenya and in the East Africa region that reduced investment in agriculture from 10 percent to 3 percent of the government’s budget.
Commitments therefore should be pegged on clear development thresholds or benchmarks and must not be more onerous than the low levels of liberalization by other countries in EU Free Trade Agreements. Only when these benchmarks have been attained should countries liberalize a certain percentage of their trade with the EU.
Again The Economic Partnership Agreement negotiations should take into account the common positions on the various contentious issues articulated by the Kenyan negotiators on behalf of businesses and farmers.
For example, various clauses in the agreement which the EU has inserted should be eliminated: standstill clause; export taxes; Most Favoured Nation clause, non-execution clause and abolition of community levies as these are clearly World Trade Organization-plus and would put Kenya's development objectives in serious jeopardy.
Multiple award winning Kenyan journalist Bob Koigi is the Chief Editor of East Africa at Africa Business Communities
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[Column] Bob Koigi: Trade talks should be holistic and accommodate interests of all
Kenya's horticulture industry which has emerged as one of the key foreign exchange earners for the country, and second to tea, has in the recent past been under threat due to incessant stalled export agreement with the European Union.
The sector has been hard hit in the past four years as producers grow anxious over a weakened global economy, and failure to conclude these talks. The delayed conclusion of the Economic Partnership Agreement stalled following disagreements touching on economic and development co-operation, rules of origin, export taxes and the most-favoured nation clause.
What is worrying is that the talks have been going on for more than a decade, and with each deadline passion without amicable solution, we all have cause for concern. Growers have increasingly become jittery arguing that inconclusive trade talks have affected planning with most of them cutting back on investments.
In 2013, Kenya’s flower industry brought in 46 billion Kenyan shillings, three billion shillings more than the previous year. The European Union is the largest market for the flower industry having absorbed about 70 percent of all exports in 2013.
Kenya’s Sh110 billion fresh produce export trade with the EU has always teetered on the brink of precipice because with each stalemate, the country gets closer to losing the preferential tax-free access it currently enjoys.
This owing to the fact that Kenya, unlike its EAC partners, is not classified as a Least Developed Country in World Trade Organisation nomenclature.
If no pact is signed, earnings from Kenya’s hugely successful horticultural industry could be greatly diminished, as key buyers, like the Dutch flower auctions, seek cheaper options.
Flower exports are consequently a crucial economic activity for the country, and Kenya could stand to lose roughly 500,000 jobs directly and indirectly if the agreement is not concluded. Around 2.2 million jobs could also be at stake.
Should Kenya not sign the Economic Partnership Agreements, its trade with Europe would revert to the less-generous terms of the General System of Preferences where some of its products, which have been enjoying zero duty, would attract attracting charges of between 8.5 to 15.7 per cent. These products include cut flowers, fresh fruit and vegetables among others.
While there are legitimate concerns which can explain why the talks have stalled it is imperative that the agreements be mutually beneficial and not based on threats or coercion.
Once pen is put to paper it will be hard to reverse the agreements. That is why every detail should be analyzed and reviewed with a fine toothcomb. We cannot make the same mistakes we made in the 90’s that condemned our farmers to a chaotic market model. Past liberalization of agricultural markets under the Structural Adjustment Programmes and liberalization enforced by the World Trade Organization (WTO). This liberalization that contributed towards the loss of our cotton and sugar industries in Kenya and in the East Africa region that reduced investment in agriculture from 10 percent to 3 percent of the government’s budget.
Commitments therefore should be pegged on clear development thresholds or benchmarks and must not be more onerous than the low levels of liberalization by other countries in EU Free Trade Agreements. Only when these benchmarks have been attained should countries liberalize a certain percentage of their trade with the EU.
Again The Economic Partnership Agreement negotiations should take into account the common positions on the various contentious issues articulated by the Kenyan negotiators on behalf of businesses and farmers. For example, various clauses in the agreement which the EU has inserted should be eliminated: standstill clause; export taxes; Most Favoured Nation clause, non-execution clause and abolition of community levies as these are clearly World Trade Organization-plus and would put Kenya's development objectives in serious jeopardy.